TOPIC 2:
SALE OF GOODS
Recommended Textbook:
The Commercial Law of Malaysia, by Beatrix Vohrah & Wu Min Aun, (2000).
(A) Formation of Contract
• The main statute applicable is the Sale of Goods Act 1957
[Act 382] (‘SOGA’).
•SOGA applies only in Peninsular Malaysia. For Sabah &
Sarawak, both states continue in using the principles of
English law by virtue of S.5 (2) of the Civil L aw Act 1956.
• S.4 (1) of S O G A defines a contract of sale as “a contract
whereby the seller transfers or agrees to transfer the property
in goods to the buyer for a price.”
• ‘Price’ is defined in section 2 of S O G A as ‘the money
consideration for a sale of goods.’
(A) Formation of Contract
• S.4 (3) of S O GA:
o A contract of sale is called a Sale/Executed Contract of Sale when the
property in the goods (ownership) is transferred from the seller to the
buyer.
o Whereas, the contract is called an Agreement to Sell/Executory Contract
of Sale if the transfer of the property in goods is to take place at a future
time/subject to some condition there after to be fulfilled.
• ‘Contract of sale’ includes both sale and an agreement to sell.
•A sale occurs when ownership or ‘property in good’ passes to the buyer.
• Note: ownership or ‘property in good’ should be distinguished from possession.
o A person may be the owner although not in possession of the goods. [e.g. lend
books to ors]
o A possessor of goods may not be the owner. [e.g. borrower – books borrowed
from library]
(A) Formation of Contract
Distinction between a sale & an agreement to sell
Harper G ilf illa n S d n . Bhd. v Kean Toh Amang Factory S d n .
Bhd. & Lee Kwee Hong (Claimant) [1986] 1 M L J 249
oPlaintiffs obtained judgment against the first defendant caused a writ
of seizure.
oThe bailiff seized a number of goods at the factory.
oLater, Lee Kwee Hong (Claimant) claimed the goods seized belonged to
him, relying on a written sale and purchase agreement.
oPlaintiffs contended that, at the date of seizure of the goods, property
in the goods/ownership was still with the judgment debtor (1st Def).
oCourt agreed, held that property did not pass to the claimant in an
agreement to sell, only a jus in personam (right to sue the person) is
created.
(A) Formation of Contract
• S.2 of S O G A defines goods as every kind of movable
property including stocks and shares, growing crops, grass
and things attached to or forming part of the land which are
agreed to be severed before sale or under the contract of sale.
• Immovable property, actionable claims, trees and fixtures
attached on earth and not severed are outside of
definition. this
• Trees form part of land are immovable, not ‘goods’ –
What about logs?
(A) Formation of Contract
• Under s.6 (1) of S O G A , there are 2 types of goods -
🞄 (i) Existing goods; and
🞄 (ii) Future goods.
• Existing goods are those goods which are already owned/possessed by the seller at the
time of the contract of sale. It may be further divided into either specific goods or
unascertained goods.
o “Specific goods”: goods are specific if they are ‘identified and agreed upon at the
time a contract of sale is made’ (s 2 of SOGA). [e.g. Car registered as B C Y 121]
o “Unascertained goods”: mentioned in s 18 of S O G A but not expressly defined; by
inference it means ‘goods not identified and agreed upon at the time a contract of sale is
made. [e.g. sales by description – 100 chairs, but no specific description on what kind]
Nagurdas’ case (1911) 12 S S L R 67
o there was a sale of flour bearing a well-known trademark previously.
o Later on, the flour (“unascertained goods”) was ordered based on the description as “the
same as our previous contract", which identical in quality.
o However, it failed to bear the same well-known trademark when it was delivered to the
buyer.
o Held: not comply with description.
(i) Sale of Existing Specific Goods
• S.19 of S O G A - if it is a contract for the sale of specific/ascertained goods, the
property in the goods passes to the buyer – when the parties to the contract intended
it to be passed.
• S.20,21 and 22 of S O G A provide assistance in determining parties’ intention.
🞄 S.20 - if it is an unconditional contract to sell specific goods in a deliverable
state, property passes to the buyer – when the contract is made.
🞄 S.21 - if there is a contract to sell specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state,
the property pass to the buyer – when the seller has done this thing and the
buyer has notice that it has been done.
🞄 S.22 - if it is a contract for the sale of specific goods in a deliverable state, but
the seller is bound to weigh, measure, test/do some other act or thing to the
goods for the purpose of ascertaining the price, the property will pass to the
buyer – when such act or thing is done and the buyer has notice of it.
(ii) Sale of Existing Unascertained Goods
• S.18 of S O G A - if it is a contract for the sale of unascertained
goods, the property in the goods passes to the buyer – when
the goods are ascertained.
• S.23 of S O G A - where there is a contract for the sale of
unascertained/future goods by description and the goods in
a deliverable state are unconditionally appropriated to the
contract the property will pass to the buyer – when the seller
assent to the appropriation.
Elements of Contract of Sale
• S.5(1) of S O G A : a contract of sale is made by an offer to buy or sell
goods at a price and by the acceptance of such an offer.
• S.2 of S O G A : a buyer as a person who buys or agrees to buy goods and a
seller is a person who sells or agrees to sell goods.
• S.4 (1) of S O GA : a contract of sale is made when the
seller
transfers/agrees to transfer the property in goods to the buyer for a price.
• S.2 of S O G A defines price as the money consideration for a sale
of goods.
• The essence of a sale of goods is the transfer of property in the goods from
the seller to the buyer.
Maxim: ‘Nemo Dat Quod Non Habet’
• S.27 of S O G A - where goods are sold by a person who is not the owner, and who does not
sell them under the authority or with the consent of the owner, the buyer acquires no
better title to the goods that the seller had.
o Enshrined in the maxim nemo dat quod non habet, meaning no one can transfer a
better title than he has himself.
o Thus if goods are pruchased from a person who is not the owner and who does not sell
them under the owner’s authority, the buyer does not acquire a title even if he has
paid value in good faith.
o Aim of this rule: protect right of ownership so that if, e.g. goods are stolen and
subsequently sold, right of the original owner is retained.
Development of nemo dat rule: Bishopsgate Motor Finance Corpn. Ltd v Transport
Brakes Ltd (1949) 1 K B 322 [Lord Denning]
• “In the development of our law, two principles have striven for mastery. The first is for the
protection of property: no one can give a better title than he himself possesses.
The second is the protection of commercial transactions: the person who takes
in good faith and for value without notice should get a good title. The first
principle has held sway for a long time, but it has been modified by the common law
itself and by statute so as to meet the needs of our own times."
Maxim: ‘Nemo Dat Quod Non Habet’
There are few exceptions to the general rule:
1. Estoppel
•S.27 - the nemo dat rule is not applicable when the real owner of the goods is by his
conduct precluded from denying the seller’s authority to sell.
🞄 Owner of goods by his conduct makes it appear to a buyer that the person who
sells the goods has his authority to do so and the buyer acts in reliance on it.
🞄 Owner will be estopped from denying the seller’s authority.
🞄 Buyer who takes in good faith and for value will acquire a good title by estoppel.
a person who is appointed by those in business to act on
2. S ale by Mercantile Agent their behalf or to represent them in dealing with other
persons.
• Proviso to s.27 - a title is effectively transferred, when a
mercantile agent who is
in possession of the goods with the consent of the owner, sell the goods when acting
in the ordinary course of business of a mercantile agent.
Maxim: ‘Nemo Dat Quod Non Habet’
3. Sale by one of joint owners
• S.28 - If one of several joint owners of goods has the sole possession
of them by permission of the co-owners, the property in the goods is
transferred to any person who buys them of such joint owner in
good faith and has not at the time of the contract of sale
notice that the seller has no authority to sell.
4. Sale under a Voidable Contract
• S.29- Where the seller of goods has obtained possession thereof under a
contract voidable under section 19 or 20 of the Contracts Act 1950, but the
contract has not been rescinded at the time of the sale, the buyer acquires
a good title to the goods provided he buys them in good faith and
without notice of the seller’s defect of title.
Maxim: ‘Nemo Dat Quod Non Habet’
5. Sale by Seller in Possession of Goods
• S.30(1) - a seller who has parted with the title to the goods but
remains in possession of the goods/the documents of title can pass
a good title to a bona fide buyer. The secondary buyer gets a
good title whereas the original buyer loses his and has to
claim remedy against the seller.
6. Sale by Buyer in Possession of Goods
• S.30(2) - a buyer who have bought the goods or agreed to buy the
goods and have obtained possession of the goods or the document
of title with the consent of the seller, can pass a good title
to an innocent buyer under any sale or disposition.
Maxim: ‘Nemo Dat Quod Non
Habet’
• [Link]
(B) Discharge of Contract
• Similar to ordinary contract, a contract of sale may be discharged in the following
ways: -
i. By Performance; &
ii. By Breach.
Discharge by Performance
• S.31 of S O G A - it is the duty of the seller to deliver the goods.
• S.36 of S O G A - the place of delivery are as follows:
(a) Sale of existing goods - place at which the goods are when the sale is made.
(b)Agreement to sell existing goods - place at which the goods are when
the agreement to sell is made.
(c) Sale of future goods - place at which the goods are produced.
Discharge by performance
Discharge by Performance
Seller Buyer
Accept Delivery
Delivery
Payment
Take Delivery
(B) Discharge of Contract
• S.37 of S O G A – if the seller delivers to the buyer wrong quantity:
i. the quantity of goods are less than he contracted – the buyer
may totally reject the goods or accepts it.
ii. the quantity of goods are more than he contracted – the buyer
may accept the goods which are in accordance
with the contract and reject the rest, or he may reject the
whole.
iii. the goods mixed with other goods of a different description
not included in the contract - the buyer may accept the
goods which are in accordance with the contract and
reject the rest, or he may reject the whole.
(B) Discharge of Contract
The buyer may discharged his duty under a contract of sale of goods
by performing the following –
i. pay the seller;
ii. accept delivery of the goods from the seller; or
iii. take delivery of the goods from the seller.
Exception to Performance
iv. Impossibility of Performance
v. Consent or Agreement
(B) Discharge of Contract
Discharge by Breach
• Breachof contract of sales on part of the seller occurs when the
seller fails or refuses to perform or fails to
perform satisfactorily his duty to deliver the goods.
• Breach of contract of sales on part of the buyer occurs when the
buyer fails or refuses to perform or fails to perform satisfactorily
his duty to pay for the goods; to accept the goods; and to
take delivery of the goods.
Discharge by breach
Discharge by Breach
Seller Buyer
Fails to accept delivery
Fails to make delivery
Fails to make payment
Fails to take delivery
(B) Discharge of Contract
Remedies for Breach
Remedies for Seller:
• S.55 of S O G A - where the buyer wrongfully neglects/refuses to pay for the
goods, the seller may sue the buyer for the price.
• Remedies for non-payment:
• S.46 of S O GA :
i. Lien;
ii. Stoppage in transit; and
iii. Resale.
• S.44 of S O G A : when the seller is ready and willing to deliver the goods and requests
the buyer to take delivery, but the buyer does not, refuse or neglect within
a reasonable time after such request, to take delivery of the goods, he is liable to
the seller for any loss occasioned by his neglect or refusal.
• S.56 of S O G A : where the buyer wrongfully neglects or refuses to accept and
pay for the goods, the seller may sue him for damages for non-acceptance.
(B) Discharge of Contract
Remedies for Buyer:
• Damages for non-delivery
🞄 S.57 - where the seller wrongfully neglects or refuses to deliver
goods to the buyer, the buyer may sue the seller for damages for
non-delivery of goods.
• SpecificPerformance
🞄 S.58 - if there is a breach of contract to deliver specific/ascertained
goods, the buyer may apply from court a decree directing that the
contract to be performed specifically.
Thank you